What Is a Lockbox Payment?

FT Contributor  | 

You may have sent a lockbox payment to your utility company or another business you pay bills to without even knowing it. A lockbox is a special P.O. box address where customers remit bill payments to a specific company. Banks offer and manage these lockboxes and receive the payments sent to the company. Customer payments are deposited into the company’s account directly to streamline the bill paying process.

Companies may sign up for lockbox services with their bank if they’re responsible for processing numerous customer payments each month. A lockbox offers a secure and central location to receive these payments and they’re processed directly by the bank, saving the company time and work.

Customers who send in their payments to these lockboxes also benefit from the process because mailing and processing times are generally shorter when the bank is in charge. Learning more about lockboxes and how these payments are processed will help you understand what happens to your payment after you send it out to a company.

How Lockbox Payments Work

A lockbox payment is processed differently than a payment you send directly to a company. If a lockbox payment service is involved, the bank intercepts the payment and processes it so the company can skip this step.

Since the bank processes all mailed customer payments, the company is relieved of arduous administrative and bookkeeping tasks, including filling out deposit slips and traveling to the bank to deposit these payments.

Payment Due Dates

When you send in a payment to a lockbox, the processing time is generally shorter. Depending on the size and scope of the company that requests to sign up for lockbox payments, a bank may set up several lockboxes across the country. This cuts down on mailing time and allows payments to be processed faster.

A payment sent directly to a company and not to a lockbox may have further to travel. Once the payment is received, it may take a few days for the company to finish processing it.

Although lockbox payments arrive faster, as a customer you must still observe and adhere to your payment due date. Be sure your payment is postmarked a few days before it’s due. This ensures it’s received and processed by the due date and you’re not subject to late payment penalty fees.

Payment Amount

When you make a payment to a company through a lockbox, you don’t need to include additional fees. You simply need to provide a check or money order for the amount the company has billed you. When you send your payment out to the lockbox, you’re also responsible for providing the postage fees required to mail it.

How to Make A Payment

When you receive a bill from a company, it may have a remittance slip. To make a successful payment, fill out the remittance slip with the information requested, such as your name and account number. Send this slip along with your payment to the P.O. box provided.

Your bill may also provide additional payment options. Most companies now allow you to pay your bill online so you can skip mailing out a check. If you prefer this option, visit the company’s website and provide your payment information electronically. Paying online is a good option because your money is received instantly, so you don’t need to worry about making a late payment.

Advantages of a Lockbox

A company that receives countless customer payments may get overwhelmed attempting to keep these payments organized and process them in a timely fashion. Companies who deal with regular customer payments could sign up for a lockbox payment service with their bank because it’s a convenient and quick way to have these payments processed.

There are several advantages a company experiences after it signs up for lockbox payments with a bank, including the following:

  • Quick payment processing.
  • Payments distributed directly to their account.
  • Easier organization of customer payments.
  • Mail is delivered to lockboxes multiple times per day.
  • Mailing times are shorter because lockboxes are closer to customers.
  • Company representatives don’t need to make bank deposits.
  • Money is available sooner.

As the customer of a company that utilizes lockbox payments, you also experience advantages to this payment process, such as:

  • Faster mailing time.
  • Timely payment processing.
  • Less potential for payment processing errors.
  • Fewer accounting and administrative errors.

As a consumer, you shouldn’t notice a difference between sending your payment via check to a lockbox or directly to the company. However, if it’s sent to a lockbox, be prepared for your payment to be processed quicker and the amount to be taken from your account faster.

Disadvantages of a Lockbox

While lockbox payments through a bank alleviate many headaches for companies, there are some disadvantages to this service. Some of the disadvantages companies may experience with lockbox payment services include the following:

  • Banks charge high fees for lockbox payment services, which may include a fee per transaction or fixed monthly rate.
  • It’s a slower process than electronic payments.
  • Unsupervised bank employees may have access to lockboxes.
  • Customer information on checks may be used to make counterfeit documents.
  • Fraudulent or bounced checks affect account balances.

While customers experience faster mailing and processing times when they pay companies through lockbox payments, there are also some disadvantages, including:

  • Lockbox payments aren’t as quick and efficient as automatic bill payments or electronic payments.
  • Customer checks are vulnerable to counterfeiting or theft.
  • Customers still need to factor in mailing and processing time to ensure their payment isn’t late.

Lockbox payments are processed directly by the company’s bank, making the process seamless, fast, and simple. While this payment processing method isn’t as quick and easy as electronic payments, customers may experience shorter mailing and processing times, ensuring their payments are received on time.


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